> Secured Credit Cards Can Give You a Secure Future

Secured credit cards are perfect for first-time cardholders with limited or no credit history. If that's you, then you probably should apply for a secured credit card first, since you may not qualify for a low interest rate credit card. You should take the secured credit card anyway, since you can always renegotiate the rate after six months. If you pay your secured credit card bill in full each month, the interest rate won't matter.

Don't shop for several secured credit cards at the same time. That mistake -- called shotgunning your credit -- is sure to sabotage your chances. "Any time you apply for a secured credit card or any other credit, you get the credit process started," says Paul Richard of the National Center for Financial Education.

Secured credit card issuers checking your credit report will see the other inquiries and assume the worst -- that you'll get the secured credit cards and use the entire credit limit. If secured credit card issuers think you have too many cards, even if they are all secured credit cards, they'll be less confident that you'll be able to pay off all of those secured credit cards.

"Each inquiry for a secured credit card counts anywhere from two to five points off your credit score," says Kelly Snowden of American Credit Consulting, which works with consumers who have credit problems. Pulling your own report to check its accuracy has no effect on your score. In fact, it's a good idea to check your credit report before you apply for a secured credit card.

Being rejected for a secured credit card can also hurt your chances of being accepted for one in the future. But those direct-mail offers promising that "you've been preapproved" for credit really mean that you've been preapproved to apply for a card. You can still be turned down.

How to Get a Secured Credit Card
One of the fastest ways to get credit is to apply for a secured card online, which requires you to deposit money in a savings account or CD that is frozen while you have the secured credit card. That takes the risk out of it.

The amount of the deposit varies. For example, you'll need to put down $99 for a particular secured Visa card to obtain a credit limit between $200 and $500. This secured credit card carries a 19.8% interest rate, and there is a $29 annual fee.

Another example is a secured MasterCard. Although this secured credit card carries a $50 annual fee and requires a $500 deposit for a $500 limit, it has a lower interest rate -- 15.9% -- and pays 4% interest on the deposit.

Make sure that the issuer will eventually upgrade the secured credit card to one that is unsecured. Capital One, for instance, will upgrade a card after six months for customers in good standing.

Sometimes customers who have bad credit ratings or habitually bounce checks are forced to use secured credit cards, which can be a red flag to other credit issuers. To avoid tarring good applicants with the same brush, some lenders report all the cards they issue as unsecured credit cards.

Before applying for a secured credit card, find out how it will be reported to the credit bureaus. Avoid issuers that deal exclusively in secured credit cards and don't offer the option to upgrade.

With so many legitimate alternatives, don't be sucked in by Web sites that promise to get you a card, or that charge exorbitant or unnecessary fees. Some secured credit card issuers charge an application fee, a processing fee and an annual fee -- and if you're late paying those charges the issuer slaps on a penalty and charges interest retroactively.

You could end up with a credit line of $500 and a balance of $450 before you've even used the secured credit card. Unless the charge is an annual fee or a deposit for a secured card from a reputable issuer, don't prepay for a credit card.

About The Author:

John Tobin is a successful author and the publisher of http://www.credit-card-debts.com. He teaches Downside-Up Marketing at www.online-affiliate-programs.com, and runs the Free Phone Site at www.1st-free-internet.com.

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